Audiology & the Transparency Gap



Author: Garrett Thompson, BA

In the September/October, 2016 edition of Audiology Today, I wrote an article about the increased debt burden the audiology student has in the era of the Au.D. Part of the article discussed how significantly higher debt loads could negatively affect the future of the profession. One of the most impactful consequences, in my opinion, will be prospective private practice owners choosing to minimize their risk by striking a deal with a manufacturer to receive financial support in exchange for preferentially dispensing that company’s hearing aids. We see this is already happening with increasing regularity. I believe this could pose an existential threat to independent private practice, even more so than new competition entering the market, such as Big Box or internet sales. The reason is simple, and it is part of a larger problem in private practice: we suffer from a self-inflicted lack of transparency.  

As discussed in their fine book, Can’t Buy My Like, by Bob Garfield and Doug Levy, business in the age of social media is marked by the power of the consumer and the availability of information. The walls of corporate privacy have been torn down. Whereas companies could once operate in relative secrecy, now rarely does a scandalous business practice go unexposed. From the pink slime McDonald’s used to make their McNuggets to Volkswagen surreptitiously cheating on government mandated emission tests, the internet has a way of exposing the truth. And, when reality is brought to light, when consumers realize they have been duped, the damage to that company is often irreparable. This permanent damage inflicted upon the reputation of companies is due, in part, to a changing mindset of consumers. In recent years, the customer not only cares about high quality and reasonable prices, they care about the morals and values of the company with which they interact. Companies like Whole Foods, Patagonia, and Apple thrive because consumers believe in what they stand for. Ethical-based brand allegiance can be broken, however, if companies don't hold themselves accountable to their code. The sustainability and responsible sourcing that Chipotle stood for made it a wildly successful growth business for 10 years, only to have its sales gutted when scandals over foodborne illness contradicted their core mission. The story went viral, so to speak, and their stock price tumbled 50% in less than a year.

Small business is no less vulnerable, albeit on a lesser scale. If someone wants to know how you treat your customers, or if they want a quick gauge of your reputation, they can find it with a single Google search. Recently, public reviews have become so essential to the consumer experience that entire businesses are built on them; consider, for example, if anyone would use Uber or Airbnb if one couldn't confirm a high rating of a driver or host. Ironically, in an era when trust in institutions is crumbling rapidly, trust in complete strangers is surging. The cornerstone of this trust in strangers is authenticity, transparency, and a commitment to a set of core values. Companies that thread their core values through every process and practice, every customer interaction, and every step in their supply chain will not only have nothing to hide, but they will be rewarded when customers buy into that shared vision. By promoting fairness, transparency, and their specific core mission, businesses big and small can engender a sense of trust that will lead to continued success in the digital media age (Garfield and Levy, 2013).

In private practice audiology, we fail the transparency litmus test in two dramatic ways. The first is by operating under the banner of, or under the table with, hearing aid manufacturers. All of the "Big 6" manufacturers own hearing aid retailers, in an effort to control the distribution channel of their products. I have no problem with that; it is their right to do so. In contrast, you have the independent private practitioner. Traditionally, independence offered clear advantages: the patient will logically trust a healthcare provider who has no financial ties to the manufacturer of the device she dispenses. However, in recent years, it has become far more common for independent practices to foster a business relationship with a specific company, while maintaining the semblance of being independent. Many practices are opened with partial or complete financial backing from one of the Big 6 manufacturers; I have personally been offered such an arrangement. This entanglement inherently diminishes the audiologist’s autonomy and is opaque to the patient, which is unfair on its face. By remaining autonomous we can garner the trust of our patients and the healthcare industry as a whole. By obscuring the relationships that many practices have, we leave ourselves vulnerable to the appearance of duplicity. The trust in private practice audiology as a whole could be irreparably damaged if patients feel hoodwinked, seeing us as biased salespeople as opposed to objective health professionals. Several sources have published information regarding the reality of preferential dispensing practices, including the Institute of Medicine (now known as the National Academy of Sciences) which referenced that most dispensing practices offer only one or two manufacturers. In my experience, this is not the case; there are many independent practices offering devices from six or more manufacturers. Offering several brands, and explaining why you have chosen the device you did, as if it is a prescription for that specific patient, will garner the trust of patients and display our expertise simultaneously. Our core mission, after all, is delivering optimal outcomes to each individual patient.

The second way private practices are not exhibiting transparency is through the bundled hearing aid delivery model itself. Employing a bundled model is so opaque that consumers and governmental agencies alike report that the average set of hearing aids costs $4800. That statement is based on a fundamental misunderstanding and is patently false. The set of hearing aids they are referring to actually costs more like $1600 (which is still extraordinarily expensive, see inset). However, we all know that bundled into the final price are all kinds of costs incurred by the audiologist as well as the fee we charge for professional services. Very few people outside of our field fully understand that! This represents a major lack of transparency, and it could seriously undermine our profession. As more low-cost options enter the market, patients are likely to shop around more. Without an explanation as to why our prices seem so high, patients are left to make their own assumptions. Many of these assumptions, of course, are not always favorable to the audiologist. We must stop obfuscating the true price we charge for hearing aids. By proactively being forthright about price, and the reason why we must charge more than the retail giants, patients will see that our true value is in the exceptional care we provide. Explaining the actual cost of professional services versus the devices themselves will completely shift the public conversation about the cost of hearing aids. Transparency of this kind, and drawing the public’s attention to our core principles (care over sales), we will strengthen the loyalty of our patients and profitable business will follow. Patients don’t want bundled perks like free batteries and wax guards, they want something much deeper: confidence and trust in their healthcare provider.

The bundled service model not only flies in the face of transparency, it unnecessarily produces inequitable situations from one patient to the next. For the sake of illustration, let’s consider two patients: one is a very complicated case, let’s call him Randy, and one is relatively simple, let’s call her Sandy. Both patients paid $5000 for their new hearing aids and both are exceptionally excited to hear the world again. From the initial fitting of the hearing aids through the three year warranty period, follow-up appointments are free, as in they are included in the bundled price. Let’s say the true price of the professional services in the bundled package is $2000. Sandy was seen eight times over the course of the three year period, as her hearing loss is relatively easy to manage and she is having great success. Randy, on the other hand, has some issues. In order to manage his hearing loss throughout the three year period, he was seen a whopping 20 times. That means Randy, who required more complicated care, paid a mere $100 per consultation, whereas Sandy paid $250 per visit! This is clearly unfair, Sandy is essentially subsidizing Randy’s healthcare. This is the circumstance that bundled delivery models can create, and really for no good reason. The simplicity of charging one price does not outweigh the unfairness of this inevitable scenario. Patients are sophisticated enough to understand itemized billing and a professional services hourly rate. If and when Sandy discovers this reality, she will not be very happy.

Audiologists are keenly aware of the value of trust; we see it every day in the clinic or private practice. Counseling, at its foundation, is built on trust. We should take that lesson and apply it to the way we operate our business. We should be transparent in our business practices to strengthen that foundation. Think about the core values of your private practice, and let those values inform every interaction with your patients. Objectivity and honesty are certainly among those values, let those inform your business relationships and service delivery model. In the social media era, transparency is good business. But more importantly, in any era, it is the fair and ethical way to run a business.
Using Evidence-based Thinking to Defend Patient Need
In the last 30 years, the price of premium hearing aids has increased significantly. During the same period, the most expensive component in hearing aids, the computer chip, has decreased in cost and seen dramatically improved performance. The other hearing aid components, such as plastics and receivers, are inexpensive commodities. Digital speech signal processing strategies that are used in hearing aids are more open-source than ever with several basic DSP strategies available for free on the internet. The cost of televisions, smartphones, and computers have decreased over the same time period, although they too require expensive research and development. Why, then, has the price of hearing aids not managed to rapidly decline, similar to these other products? In my opinion, one of the main reasons is the incredible consolidation that has occurred in the hearing aid manufacturing market. A mere six manufacturers produce and distribute 98% of the hearing aids globally (National Academies, 2016); in economics this is called an oligopoly. When so few firms have a stranglehold on the market, there is less competition and less pressure to attract customers by lowering prices. As market share increases, pricing power increases. This is especially the case in healthcare and technology, America’s two most profitable industries. As described in a March 2016 article published by The Economist, when companies with so much control over pricing merge or acquire smaller competitors, they rarely pass the cost savings on to the consumer. In fact, they plainly state this in their quarterly earnings reports. As seen in recent cases such as the EpiPen or Martin Shkreli, the “Pharma bro,” lack of competition can lead to extreme price hikes for consumers. Healthcare price-gouging is real and is drawing the ire of the public (The Economist, 2016).

Instead of reducing prices as their own costs decrease, manufacturers have focused on their premium technology levels; developing the technology and firmly encouraging their customers (this is their term, we know these providers as audiologists, hearing instrument specialists, and Big Box stores) to recommend these to patients. A common pitch is to “put your patients in the best technology,” regardless of value or real-world improvement between technology levels. While these products are the most profitable for manufacturers, the data that they provide clinically significant benefit over lower technologies is dubious at best. The evidence many hearing aid manufacturers use to defend the value of their premium technology often comes from their own laboratory, where it is relatively easy to design a study that will provide a favorable result. Even if the performance difference of a premium feature is statistically significant, this improvement does not necessarily translate to real-world listening differences for patients. In fact, a recent well-designed study on this topic shows no statistically significant difference between premium and basic levels of technology for a large group of adults with uncomplicated sensory neural hearing loss (Johnson et al., 2016).

As the patient’s real-world experience of hearing aid use and benefit should be our main concern, it should be our most valued metric. If premium hearing aids can’t deliver a practically significant difference, they should not be recommended. Salespeople who represent these manufacturers will use the catchy quip: “price is only an issue in the absence of value,” I find this to be disingenuous marketing mumbo jumbo. The research shows that cost is one of the most important deciding factors for patients. In a large survey of hearing aid non-users, three of the top four priorities for hearing aid uptake were 1) 100% insurance coverage, 2) money-back guarantee, and 3) price below $500 (Kochkin, 2012). Products that are so important that consumers buy them regardless of changes in price are called price-inelastic goods; this is simply not a realistic description of hearing aids. The survey results reveal that patient decisions are indeed sensitive to price. There is no doubt that the high price of hearing aids is a substantial deterrent to hearing aid uptake.    
Garrett Thompson is an audiology student at the City University of New York and is currently completing his externship at the Callier Center of UT-Dallas. He was a national finalist in the 2015 Academy of Doctors of Audiology student business plan competition. Thompson received a BA in Economics from Boston College. Contact him at gthompson@gradcenter.cuny.edu or @Dr_Audball.
References
Bob Garfield and Doug Levy. Can’t Buy Me Like: How Authentic Customer Connections Drive Superior Results. Penguin, 2013.

Johnson, Jani A., Jingjing Xu, and Robyn M. Cox. “Impact of Hearing Aid Technology on Outcomes in Daily Life II: Speech Understanding and Listening Effort.” Ear and Hearing 37.5 (2016): 529-540.

Kochkin, Sergei. “MarkeTrak VIII: The key influencing factors in hearing aid purchase intent.” Hearing Review 19.3 (2012): 12-25.

National Academies of Sciences, Engineering, and Medicine. 2016. Hearing Health Care for Adults: Priorities for Improving Access and Affordability. Washington, DC: The National Academies Press.

"Too Much of a Good Thing." The Economist. The Economist Newspaper, 26 Mar. 2016. Web. Retrieved 29 Nov. 2016.